Lloyds Banking Group Keeps It Simple With BPM

The U.K.'s largest bank has identified 200 initiatives that need to be completed in order to simplify the entire banking organization.

When most people think of LLoyds Bank, they think of the bank founded in 1765 that is now called Lloyds TSB. However, Lloyds TSB is only part of the much younger, and larger, Lloyds Banking Group that was hastily thrown together during the 2008 financial crisis when Lloyds acquired the failing HBOS.

The result is the largest retail bank in the United Kingdom with 90,000 employees, 14 bank brands, 30 million customers and, unfortunately, duplicate, redundant and scattered core systems and processes, said Annette Barnes, Group Change Program Director for Lloyds Banking Group at the PegaWorld 2013 conference in Orlando, Fla.

"The first order of business was to get all 30 million customers onto one core system," Barnes said during her presentation titled "Transforming Banking, Simplifying IT."

The core system consolidation is just one of over 200 initiatives that Lloyds decided it needed to complete in order to complete its goal. To help manage all of the changes, Lloyds is using business process management (BPM) software from Pegasystems.

The move to a single core system would also help Lloyds Banking Group to achieve its primary goal of becoming the best bank in the U.K. by making banking simple: from simple customer interaction to simple products to simple service, according to Barnes.

"We wanted to put customers first, and not just talk about it, but actually do it," Barnes told the audience of over 2,000 attendees. "We want to make sure banking is simple and to do that, the products and services need to be simple."

In order to move the bank to a more streamlined model, Lloyds has invested over £2 billion. However, simplifying the bank is easier said than done. "Simplifying is where the hard work is," Barnes said. "How do you really simplify? This was a simplification process for the whole bank, for insurance, retail and wealth customers. In the end, it has to be simple for everyone."

Simplifying a bank with a broad set of products and customers, along with employees who support the business, is difficult. For instance, Lloyds had over 1,000 legal entities, each signifying a separate part of the business. "Over 1,000 legal entities is far too many," Barnes said. "Lloyds is going through the process of cutting the number of legal entities in half." Under new regulations in both the U.S. and U.K., getting a grasp on legal entity identifiers (LEIs) will be important.

Another example of complexity: following the acquisition of HBOS, Lloyds Banking Group found itself with 450 Lloyds offices and data center facilities -- in addition to more than 3,000 retail branches.

"We are significantly reducing the number of office locations" and "we need to make sure that our technology -- our data centers, servers, tools, along with the focus on reducing energy consumption -- is right" so that it matches what Lloyds is doing with its simplification goal, Barnes added.

To date, Lloyds is approximately half-way through the process of simplifying and streamlining the bank, reports Barnes. Lloyds has identified over 200 initiatives that need attention as it transforms the bank.

Lloyds has seen some successful returns on its BPM project already. For instance, the customer interactions in the Pensions and Investments business were completely manual. "When a customer spoke with a [bank employee], there were often 700 manual steps for the colleague to take," such as filing forms and completing paperwork, Barnes said. "We have reduced the number of steps to 23," and the bank has seen its customer service complaints drop.

In another area, Lloyds customers who wanted to close an unused account, or consolidate separate accounts, the customer needed to go through a complicated process. "It used to take 30 minutes to close an account," she said, noting that closing an account should be a relatively simple transaction. "Thirty minutes is unacceptable. Now we have reduced the time it takes to close an account to three minutes."

Lloyds has also seen its customer service ratings and scores improve. Reportable complaints per 1,000 accounts, which are tracked by the U.K.'s Financial Services Authority (FSA), have fallen significantly "and are significantly [lower] than other competitors," Barnes says.

Everybody is trying to simplify and streamline in the banking industry, but I think that one of the keys for Lloyd's is that they have definite set goals. Like wanting to cut the number of legal entities in half. Banks want to cut down on complexities but I think it helps a lot to have a starting goal of how much they want to cut.